Someone in Japan appears to have hit the alarm on the JPY rise. Policymakers have woken out of a slumber and the lights are being turned on. Over recent weeks they have been remarkably calm about the rise in the JPY. The BoJ monthly monetary policy statement thought it was just business as usual. As the JPY headed close to 15 year lows the finance minister thought the market had become a "a bit one-sided". Most of the government appeared preoccupied with internal party politics to notice the growing risks to its economy.

But in the last day or so the wheels have started to turn. The breach of 85, the strengthening against a renewed decline in the EUR, and the rapid decline in the Nikkei has helped sharpen focus on the JPY. Policymakers in Japan sound impotent in their ability to defeat deflation, but they have one big policy option still in their arsenal - massive fx intervention. At some point, almost at any time, someone in Japan is going to say, what have we got to lose? The answer is nothing, but plenty to gain.

Yesterday PM Kan called in from vacation and is quoted to have said the JPY moves were "rough" and "too sudden". He appears to have called the finance minister and suggested he talk to his people and see what they can do about it. FM Noda has said he is monitoring the situation closely.

The press seem to think the Japanese authorities are reluctant to intervene because it might not be supported by its G7 colleagues and is at odds with its calls for China to be more flexible with its currency. This is a pretty lame excuse for not intervening and again someone in Japan at any time may ask, "what have we got to lose", and the answer is still nothing. In case they haven't realised it, The US is tackling its deflation problem and part of its arsenal is to tacitly encourage the USD to fall. The UK have hardly been shy about encouraging a weaker exchange rate, and the Europeans that are probably the least inclined to play currency games only supported their currency recently to help prevent more worrying damage to its debt markets. China and Switzerland have blazed a path recently, and Japan itself did so in 2003/04 and it arguably was a great help. Japan would probably find international criticism rather muted as those abroad would realise they are standing in glass houses with a pile of stones at their feet.

David Fuller's view He says it better than I have. OK, I also have a vested interest because I am short JPY but that amounts to no more than a speck of dust on the planet compared to Japan's interest in, nay, desperate need for some competitive devaluation of its own. Failure by Japan's somnambulant government to weaken the yen will result in deeper deflation, a further loss in operating earnings for Japan's world class export industry, leading to lower tax revenue, higher unemployment and increasing debt.

Monetary purists may disagree but competitive devaluation is what we have in this global economic environment. It is ugly, devious, a tax on savers and certainly not Marquess of Queensberry rules but it is Realpolitik. (See also yesterday's Comment and Audio for more on this subject.)